📚 The great American author Stephen King rejected himself.

King had written his first story, ‘Carrie,’ but threw it in the trash because he felt it was inadequate.

The next day, his wife pulled the story draft out of the trash — she wanted him to stick with it. So he finished the book, and although over 30 publishers rejected it, he eventually got it published, paving the way for a brilliant career. He’s now worth over $500 million.

Today, we'll discuss the economics behind top-selling books (including King’s) in just 4 minutes to read.

(Housekeeping note: U.S. markets are closed Monday for Presidents’ Day, so we’ll be back in your inbox on Tuesday.)

— Matthew

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Trivia

What’s Behind a Bestselling Book?

The power of print

What was your favorite book as a child? How about as an adult?

Like movies, books provide escape. They are beacons of wisdom, empathy, and imagination. They can transport our minds, offer windows into new experiences, ignite our imaginations, and inspire creativity. Many books hold the complexities of the human condition, regardless of the genre.

Around 150 million books have been published worldwide since Johannes Gutenberg invented the movable-type printing press, which launched the Printing Revolution. Like the advent of the internet, the printing press enabled more people to access knowledge and ideas. The press helped make books objects of leisure and entertainment, as well as essential companions on life’s journey that guide and enlighten us.

“One glance at a book, and you hear the voice of another person, perhaps someone dead for 1,000 years,” said the astronomer Carl Sagan. “To read is to voyage through time.”

Today, the publishing industry has faced numerous challenges, notably the most obvious: How to stay relevant in an age dominated by algorithms, fleeting trends, and decreasing attention spans?

Although the popularity of e-books and audiobooks has risen, the industry's economics have remained fairly straightforward for decades: The big money, for the select few, is in the royalties and the rights.

The basics

Take the great American novelist Stephen King, whose books have sold more than 400 million copies, generating substantial royalties. Like many seasoned authors with numerous bestsellers, King still earns royalties on books he wrote decades ago.

Most authors like King make between $1 and $3 for each copy sold in addition to an advance, the money paid to an author upfront when they sign a contract with a publisher. So, for King, hundreds of millions of copies sold means hundreds of millions of dollars in royalties. Not to mention millions more from movie rights: Many of King’s novels and short stories have been adapted into TV series and films, such as “The Shining” and “The Green Mile.”

Another author, James Clear, wrote the mega-bestseller Atomic Habits, which has sold over 15 million copies since it was published six years ago. Even if Clear earns only $1 or $2 per copy — a conservative estimate — you can see how lucrative the book has been. (Not to mention the doors a top book can open for the author; not the least of which is paid speaking engagements.)

Here are other ways in which top authors make money:

Merchandising and licensing: Characters and stories licensed to merchandise, clothing, accessories, collectibles, and memorabilia. Authors earn additional royalties from the sale of licensed products bearing their intellectual property.

Audiobooks: Increasingly popular and another income stream for authors, though audiobook royalties are generally much less than a hardcover sale. Ditto with e-book sales.

Public appearances and speaking engagements: Authors can earn money from appearances at book signings. Corporations, communities, and sports teams regularly hire authors like Morgan Housel to speak.

Reissues: Authors earn royalties from ongoing sales, as well as reprints and reissues of older books to boost sales.

Self-publish: Today, self-publishing on Amazon (and other sites) has allowed anyone with an internet connection to publish. Self-published authors retain more control over pricing and royalties but also bear more responsibility for production, marketing, and distribution.

Breakeven: About 90% of all books don’t sell 5,000 copies, which is generally the break-even number for a book to be commercially viable.

Take Housel’s runaway bestseller, The Psychology of Money, which has sold millions of copies since it was published in 2020. Not only was Housel’s book rejected by dozens of publishers, but the publisher printed only 5,000 copies at the start to see if it would be worth printing more copies.

Harry Potter soars

Millions of children grew up on J.K. Rowling’s Harry Potter.

Once a broke waitress in England, Rowling is worth over $1 billion after her seven-volume series sold more than 600 million copies.

Rowling jotted down her initial ideas for Harry Potter and the Sorcerer’s Stone while sitting on a delayed train from Manchester to London in the early 1990s. As she wrote the book, she was on welfare, skipping meals to save money for her new baby.

“I decided it was going to be my last-ditch attempt to get this book published,” she once recalled of the mid-1990s. “And so I'd walk around Edinburgh pushing her in the pushchair and wait till she fell asleep. And then I would literally run to the nearest cafe and write for as long as she stayed asleep.”

Four or five publishers turned down Rowling’s book, saying it was “far too long for children.” However, Rowling got her big break when she found an interested literary agent.

Her initial deal with Bloomsbury got her a roughly $2,000 advance in 1997. Then, it became a bestseller, so she began earning royalties after book sales surpassed the initial advance amount.

The book was translated into multiple languages, reprinted, and adapted into a film, released in 2001. Rowling earned even more from selling film rights, plus royalties from box office revenue. The films’ success boosted book sales, creating a positive feedback loop. The “Harry Potter'' brand became a cultural phenomenon, spanning merchandise, licensing, toys, games, clothing, theme parks, and more.

Rowling’s story embodies an industry where nearly all book profits sit in the hands of very few elite authors who sell virtually all of the books. (Most authors earn virtually nothing because most books do not sell many copies.)

Final thoughts

Nobody knows what artificial intelligence will mean for authors, storytelling, and books in the years ahead.

We know this: Many of the greatest thinkers, business leaders, and creators in human history cherished and celebrated the written word, for in books, we can find solace, inspiration, and the boundless potential of the human spirit. Within a book’s pages, we can discover the infinite possibilities of what it means to be human.

Dive deeper

Watch more on how top authors make money.

See you next time!

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